Financial market infrastructures

Financial market infrastructures (FMIs) provide channels through which payments, securities, derivatives or other financial transactions are cleared, settled or recorded. Well-functioning and efficient FMIs play a critical role in promoting financial stability and economic growth. FMIs can strengthen the markets they serve; however, if not managed properly, they can pose significant risks to the financial system and be a potential conduit or source of contagion. A stable financial system therefore depends on careful management and mitigation of the key risks for FMIs.

FMIs are multilateral systems inclusive of the operator and participants. FMIs typically establish a set of common rules and procedures for all participants, a technical infrastructure, and a specialised risk-management framework appropriate to the risks they incur. In New Zealand, there are four key types of FMIs: payment systems, securities settlement systems, central securities depositories, and central counterparties.1

The Reserve Bank oversees New Zealand’s financial market infrastructures and operates two major systems (ESAS and NZClear). New Zealand’s main payments systems are displayed in figure 11 and described in table 3.

Figure 11: The New Zealand financial market infrastructure landscape

Figure 11: The New Zealand financial market infrastructure landscape


Table 3: New Zealand financial market infrastructures







High Value

Exchange Settlement Account System (ESAS)*

Provides real time gross settlement of interbank transactions across the exchange settlement accounts held with the Reserve Bank of New Zealand.

Reserve Bank of New Zealand.

High Value Clearing System (HVCS)

A set of rules for customer-to-customer real-time payments and for high value payments between participating financial institutions. Settlement occurs in ESAS.

Payments NZ Limited, a company owned by eight registered banks.


Provides payment versus payment settlement of foreign exchange transactions.

CLS Bank International.




(Systems that primarily process payments made by individuals and small businesses)

Settlement Before Interchange (SBI)

Arrangements for the progressive exchange during the day of retail payment instructions (cheques, direct debits, and credits, automatic payments, ATM settlement transactions, internet banking and telephone banking). Payments are exchanged using SWIFT and settlement of net interbank positions occurs in ESAS.

Payments NZ Limited.

Paymark Limited

Provides a network for the interchange of point of sale card transactions.

Paymark Limited, a company owned by the four major registered banks.


Provides a network for the interchange of point of sale card transactions.

EFTPOS NZ Limited, a company owned by VeriFone Systems.

Securities Settlement


Allows members to settle fixed interest and equity transactions and make cash transfers. Interbank payments occur directly in ESAS.

Reserve Bank of New Zealand.

NZCDC Settlement System*

Used to clear and settle trades on NZX markets. The system includes a central counterparty and securities depository.

New Zealand Clearing and Depository Corporation Limited (a wholly owned subsidiary of NZX Limited).

Central Counterparties




A multi-asset class central counterparty for a number of major exchanges and markets. Used by New Zealand banks to clear trades in NZD-denominated interest rate swaps.

LCH.Clearnet Group Limited.

ASXClear (Futures)

A central counterparty for clearing NZD interest rate futures and New Zealand energy futures traded on the ASX24 market.

ASX Limited.

Critical Service Providers


Provides secure global financial messaging services.

Society for Worldwide Financial Telecommunication, a co-operative owned by more than 11,000 financial institutions.

* Denotes systems declared to be designated settlement systems under the Reserve Bank of New Zealand Act 1989.


1 The international definition of FMIs also includes a fifth type of infrastructure: trade repositories. However, trade repositories are considered outside of the New Zealand FMI oversight context at the moment, as the current regulatory framework does not extend to them.


The banking system comprises the majority of lending to the non-financial private sector in New Zealand. Direct capital market funding (issuance of corporate bonds) and non-bank lending institutions (NBLIs) together account for only 6 percent of non-financial private sector borrowing.

Non-bank lending institutions (NBLIs) include non-bank deposit taking institutions (NBDTs) and non-deposit taking finance companies. The Reserve Bank of New Zealand regulates NBDTs, but does not regulate or supervise non-deposit taking finance companies. NBLIs account for just under 3 percent of intermediated credit, mainly focusing on the business and consumer sectors (figure 8).

The New Zealand private insurance sector is small by international standards. There are around 88 licensed insurers currently operating in New Zealand, accounting for approximately $26 billion in assets or 8 percent of GDP.1 2

The Reserve Bank regulates banks, insurers, and non-bank deposit takers (NBDT), for the purpose of promoting the maintenance of a sound and efficient financial system. The Bank’s approach to prudential supervision is described in our Statements of supervisory and enforcement approaches. The Bank has no responsibility for non-deposit taking non-bank lending institutions (NBLI) or unlicensed insurers. The Reserve Bank also oversees and operates New Zealand’s financial market infrastructures.